"I came to Casablanca for the waters."
"What waters, we're in the desert."
"I was misinformed."
—Casablanca, 1942, directed Michael Curtiz

"The Board of Governors of the Federal Reserve System and the
Federal Open Market Committee shall maintain long run growth of
the monetary and credit aggregates commensurate with the economy's
long run potential to increase production, so as to promote
effectively the goals of maximum employment, stable prices, and
moderate long-term interest rates."
—Federal Reserve Act of 1913

Today, something on the close order of 93 million Americans are
out of work. Although the "official" government figure claims that
unemployment is less than 6%, that figure deliberately ignores the
long-term discouraged who aren't giving the government evidence of
looking for work. A
far
more accurate picture, using the government's statistics as
organised by the algorithm used back in 1980, shows unemployment
running well above 23%.

Clearly the Federal Reserve act's goal of "maximum employment" has
not been obtained. A very great deal is very wrong with the work of
the Federal Reserve system. Consider, for example, the concentration
of wealth. Although politicians like Barack Obama talk frequently
about the idea of reducing the concentration of wealth amongst the
top one-tenth of one percent, the reality of their political policies
is very different. Since 1971, when the USA dollar broke its last
connection to gold, wealth concentration has been dramatically
exacerbated.

Tyler Durden, clearly a pseudonym, over at Zerohedge.com, has
commented
thoroughly and on several occasions about how the gold standard
not only allowed lower income Americans to gain wealth, but also
seems to have limited the prosperity of the upper echelon of income
earners. I suspect that the timing of the rise in wealth of the
latter group coincides with the Reagan era cuts in the top tax rates,
since it clearly begins well after his election in 1980.

However, his chart on the economic results of eliminating the gold
cover clause in 1971 is quite dramatic. As you can see, the 90% of
earners from the bottom through the middle-class, saw their income
growth stagnate after the change in the convertibility of the dollar
to gold in 1971.

You can also see that neither that change, nor the shift in income
tax burdens was bad for the top 1% of earners. It seems that rather
than providing stable value, the Federal Reserve has done just the
opposite. Or perhaps we were all "misinformed" about its actual
purpose from inception.

One of the people who made a thoroughly documented case about and
its connection to the statist authoritarian shenanigans of Wall Street
banking executives was
Antony
Sutton. People who falsely believe that the leading bankers of
the United States have always, or ever, been pillars of support for
free markets and individual liberty would do well to read, or at
least read reviews of Sutton's books Wall Street and the Bolshevik
Revolution (1974, 1999)
(Online
version) and Wall Street and the Rise of Hitler (1976, 1999)
(Online
version). It seems clear that many financiers, notably
Jacob Schiff
and Prescott
Bush, and industrial tycoons such as
Armand Hammer
had close ties and great affinity with mass murdering psychopaths like
Adolph Hitler and Josef Stalin.

But if you ask me, Tony Sutton's masterpiece is
The
War on Gold: How to Profit from the Gold Crisis (1977). It
is a quite excellent history of gold and silver as money going back
to ancient times. He notes the origins of paper money in 13th
Century China where Marco Polo served as a governor for Kublai Khan,
extracting gold, silver, precious gems, and pearls from merchants and
forcing them to accept mulberry-bark paper with "official"
vermillion ink markings as money. Naturally, the upshot of that
particular deal was that, over the next decades, redemptions of the
paper money for gold and other materials became less and less
frequent, then stopped altogether. Undoubtedly, the peasant
populations of Asia have long remembered these events and preferred
metal money.

The origins of contemporary banking are traced by Sutton, and by
fiction writers such as
Neal
Stephenson,
to the
closing
of the Exchequer by Charles II in 1672. Rather notoriously, King
Charles II encouraged the "goldsmiths" of London to invest their
depositors' gold in government debt. The king then wasted that money
on luxuries for him and wars for his country, losing so much money
that he eventually prevented redemptions of government debt for
government gold and silver, all of which had gone overseas to pay for
various expenses. To "fix" or at least ameliorate this situation, a
Bank of England was later established. Almost immediately, it began
creating inflation, which resulted in the "South Sea Bubble."

Another author who also went to considerable pains to document
his research is
G. Edward Griffin.
His book "The
Creature from Jekyll Island" is an excellent resource for
people who want to understand why bankers and state power
enthusiasts wanted to end the use of gold and silver as money. After
all, only deficit spending allows for really big wars, and only after
the gold standard was sacked were World Wars One and Two possible,
along with the enduring Cold War, and the new and never-ending "War
on Terror." People don't like to pay taxes, but as long as
some talking heads inform them that "the national debt is only
money we owe ourselves" they seem to be willing to accept
enormous government deficits and the endless wars that debt alone can
finance.

Misery Continues

The argument that government control over interest rates, or the
ill-conceived notion that central bankers may be trusted to
manipulate interest rates on an official basis, should generate
prosperity for everyone is interesting, but clearly has not proven
valid. Instead, misery continues to escalate, with poverty becoming
worse for tens of millions in the USA and hundreds of millions
worldwide. If the central bankers could have gotten us out of the
mess of the global financial crisis, they certainly would have done
so by now.

Here is
considerable
evidence that the economy has not recovered in meaningful ways,
such as poverty among children.
David Stockman
has accumulated a
detailed argument
strongly indicating that central bankers cannot do anything more with
their zero interest rate policies to "stimulate" a dead, or living
dead zombie, economy.

Since the 1913 Federal Reserve act, central banking has become
very popular worldwide. Many of the major nations have central bank
institutions, there is a Bank for International Settlements, an
International Monetary Fund, and, since 2000, a European Central
Bank. National central banks and these other international groups
attempt to manage interest rates, help national governments finance
enormous military expenditures, and, at times, force national
governments to make debt re-payment concessions.

We've seen in recent weeks that Greek debt has become unmanageable.
Rather than accept their losses, the commercial banks which lent much
money to Greece years ago arranged to get their loans nationalised
and super-nationalised by the governments of Germany, the European
Union, the
International
Monetary Fund. Naturally, those powers seem determined to force
Greece to capitulate, whether or not they destroy Greek lives, motivate
insurrection, or bring down
the
current government. If anarchy were to replace the existing
government of Greece, I wouldn't mind a bit, but I suspect the powers
that be in Germany and the EU would insist on a different, more
fascist or at least more authoritarian outcome.

One of the clearest
arguments
against the market manipulations of the interest-rate-setting Federal
Reserve is the evident exacerbation of volatility in stock markets.
Rather than creating stable prices and sustained growth, the Federal
Reserve has forced the world onto a wild
roller-coaster
of booms and busts. Here is a simple chart showing the Dow Jones
Industrials priced in gold.

As you can see, things were actually better, in terms of the stock
market boom-bust cycles prior to the creation of the Federal Reserve.
But, wait, you say. You thought that events like the
Panic
of 1907 motivated politicians like senator
Nelson
Aldrich (father-in-law of
John
D. Rockefeller, Jr.) to examine the boom-bust cycle and implement
solutions like the Federal Reserve. You were told that the Federal
Reserve was meant to reduce the volatility of the boom-bust cycle,
not exacerbate it. Perhaps you were... misinformed.

What Central Banks Actually Do

If central banks do not make people generally more prosperous, do
not stabilise prices, do not maximise employment, do not reduce the
extremes of the boom-bust business cycles, do not and
cannot
create stable money, then what do they actually do?

They clearly interfere with international markets, since interest
rate changes are an excellent predictor of price changes in
commodities, stocks, and bonds – but only central bankers can
know what interest rates are about to do. In the particular case of
gold, the central bankers, the regulators of financial markets, and
certain enormous banks seem to be effective at creating paper gold
and
manipulating
the price of gold at least, and probably silver and other
precious metals.

But, what they seem to be best at, what bankers seem to get out of
the central banking infestation, is consolidation of the banking
industry. In 1913, there were
27,285
banks in the United States, serving a population of
97,225,000.
Today, a population over three times as large, about
325
million, is served by
fewer
than 7,000 banks.

According to the
annual report of the Dallas Federal Reserve in 2011,
the banking industry had already been consolidated to about 12,600
banks in 1970. At that point in time, the five largest banks in
the United States held only 17% of the total financial assets in
the country, with a healthy third of assets held by 95 medium-sized
banks and almost half of financial assets held by the 12,500
smaller banks. By 2010, the five largest banks controlled about
52% of financial assets, medium-sized banks held about a third,
and only 16% of assets were divided among some 5,700 other banks.

In a free market, where industry consolidation is not government policy,
where open competition exists, an executive being paid $22 million a
year would be unremarkable – it would simply indicate that the
company highly valued that person and that the profits of the company
were excellent. But in a managed industry, as heavily regulated and
government-controlled as any industry in the world, executive
compensation is a result of public policy. So, the consolidation of
the financial industry for the direct financial benefit of those who
own and operate the largest banks is current public policy. One may
naturally ask whether or not it is good public policy.

In other words, the global recession that began in late 2008 has not
been resolved. The structural issues that were revealed, the housing
bubble (and its
recent
echo), the new
student
loan bubble, and other financial market shenanigans
(credit
default swaps, e.g.) paint a picture of dire economic consequences
from public and financial industry policy. These are the kinds of
situations that have, in the past, resulted in global wars, genocides,
and tyranny.

At the same time, there are a number of extremely hopeful developments.
People continue to innovate against the powers that seek to centralise,
pillage, and destroy people. Technologies
continue
to be developed that make it possible to generate new industries,
new ways of living, new methods for privacy, economic freedom, and
individual freedoms of every kind.

One of these new technologies celebrates its seventh birthday this
Hallowe'en. In 2008, Satoshi Nakamoto, almost certainly a pseudonym,
published "Bitcoin: A Peer-to-Peer Electronic Cash system."
Although bitcoin clearly has many difficulties, including an enormous
blockchain (now
approaching
40 gigabytes), it also performs something
on the order of $22 billion a year in transactions, based on the $60
million a day in
transaction
volume of recent weeks. Bitcoin's limitations in the areas of user
privacy and freedom from government regulation are being addressed by
other innovators.

Free markets are inherently cooperative systems. That may sound
strange, since we are told, repeatedly, that free markets depend upon
competition. It is competitive pressures that reduce prices, spur
innovation, and encourage the development of alternatives. However,
every free market must do one thing in order to be a free market: it
must find market clearing prices.

If people are free to find market clearing prices, they are able
to produce, sell, and buy, without oversight or control. Tyranny, as
Hayek noted in The Road to Serfdom always begins with
interventions to attempt to control market prices. The central
control over interest rates is a clear example of incipient tyranny.
And how are market clearing prices found? Through the cooperation of
buyers and sellers to discover prices.

To be free you need understanding. Vigilance is excellent, if you know
what to look for. So, to be more free, you may wish to learn more.

You know, for example, that you are being watched. Domestic
surveillance systems, even ones never authorised by the USAPATRIOT
act, have been deployed to monitor essentially all of your
communications. Therefore, you should learn how to protect your
privacy.

Learn, for example, about open source computer software and operating
systems like Linux. Open source means that you can know what your
software is doing, and so can people who are expert in writing
software. Open source software allows you to protect your data, your
privacy, and, therefore, your freedom, better than proprietary
software which does whatever someone else wants it to do, whether you
think that's wise or not.

Learn about cryptography. You don't have to be able to find the prime
number factors in a large number to be able to use encryption for
your data. You simply have to know how to work with people who have
already developed encrypted root hard drives, e-mail encryption, and
alternative communications technologies like XMPP (eXtensible
Messaging and Presence Protocol). In general, you only need to know
what to look for, what to ask for, and what to install in order to
have excellent results. You'll want to spend quite a bit of time
looking at the weaknesses in The Onion Router (TOR) and the
advantages of a private virtual privacy network (VPN) approach to
online activities.

You may also wish to reduce your footprint. You might not be well off
telling everyone about every thing you are doing every day. For
example, every post you make to Facebook, or to Twitter, or wherever,
is a record, almost certainly a permanent record, of what you are
saying about what you think, what you do, what you want. Given that
your friends and family are not the only ones watching, reading, and
storing this information, you might choose not to create a Facebook
account or choose not to log in very often, or not at all.

What the future will actually look like, I don't think anyone currently
knows. But it seems very logical to suppose that the experiment in
gigantic governments with unlimited powers, dictatorial tendencies,
controlled by mass murdering psychopaths which was emphasised in the
19th Century through the work, wars, and policies of nationalist
socialists like Lincoln and Bismark, in the 20th Century by
internationalist socialists like Lenin, Stalin, Mao, and Pol Pot, and
in the 21st Century by "kinder gentler" socialists like
Bush and Obama has come to its inevitable conclusions. Central
bankers no longer have the power to sustain the kleptocracy.

Whatever it brings, you and I will see the future, and in some measure, choose
to shape it. I believe you should seek to keep in touch with other
people in the freedom community. I think Liberty.me is one of the
very finest sites for that purpose. And, to update people on the
work that I've begun with some of my closest friends, I've started a
Twitter account called
@digitalcashally.

I would love to hear more about what you think. Together, I believe we
can bring about a renaissance of freedom, innovation, and human
achievement.

Tyrone Johnson is the marketing and business development lead for
the Digital Cash Alliance. You can follow his posts on Twitter
@digitalcashally or read his blogs at
http://silenttyrone.liberty.me/ or at https://SilentVault.com/

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